SA's rising budget deficit further diminished appetite for South African government bonds this week, with local bonds consolidating at their weakest level in 11-months on Thursday morning. At 10am, the yield on the benchmark R186 government bond maturing in 2026 had risen to 9.36%, roughly the level it had traded at shortly before the ANC's elective conference in December 2017. Weakness in bonds has been partially prompted by news that the Treasury will increase the size of the bond auction by R450m in November, adding to other factors putting pressure on the market, such as the increased risk of a sovereign credit-ratings downgrade. Local bonds may now be oversold, analysts said. Tuesday's weekly government bond auction attracted bids of only R4.17bn, compared to R12.69bn a week before. Local investors were seemingly on the sidelines, analysts said, amid thin liquidity on global markets and risk-off sentiment. The Treasury had said last week that it was running R5bn behind schedule...

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